LightSquared, the upstart ready to build a new 40,000 tower national 4G …

The GPS wars are heating up again. LightSquared, a newish company that wants to build a $14 billion open access satellite/4G LTE broadband network over the next eight years, has a problem: its terrestrial base stations appear to wreak havoc with some GPS devices—but the company blames GPS makers for the problems and accuses them of running a government-subsidized business.

LightSquared's bold plan is to launch a new nationwide satellite/terrestrial network that it will then resell on a wholesale basis to other companies wanting to offer wireless service. It pledges not to enter the retail business itself (unlike, say, a company like Clear).

But LightSquared's spectrum holdings (between 1525MHz and 1660.5 MHz) are close to the GPS satellite signals used to geolocate cars, boats, and your smartphone. If Lightsquared builds 40,000+ national towers transmitting much stronger signals, the worry is that GPS signal reception could be affected.

The GPS industry's "Coalition to Save Our GPS" claims that its analysis shows "that the distant, low-powered GPS signals would receive substantial interference from high-powered, close-proximity transmissions from LightSquared's planned network of 40,000 ground stations. The consequences of disruption to GPS signals are far reaching: LightSquared's facilities could create tens of thousands 'dead spots'—each miles in diameter—throughout U.S. cities where there was a LightSquared transmitter."

The FCC also has concerns, and has ordered Lightsquared to convene a working group and report back on the issue (and any potential workarounds) before approval to proceed will be granted.

LightSquared filed that report today. The company's accompanying public statement didn't dwell on the interference concerns, though it's clear they are real. But who's to blame? LightSquared now says that "interference is caused by the GPS device manufacturer's decision over the last eight years to design products that depend on using spectrum assigned to other FCC licensees."

The company also says that GPS vendors have shown no willingness to find a fix and says that "the GPS industry could have avoided [this problem] by equipping their devices over the last several years with filters that cost as little as five cents each." Lightsquared has developed its own "three-part solution" to the problem that will now be vetted by FCC engineers.

LightSquared's testing shows that the fix "resolves interference for approximately 99.5 percent of all commercial GPS devices—including 100 percent of the 300 million GPS-enabled cell phones" and says that it can't believe such a terrific national benefit as a new national wireless network could be held up over "a problem posed by approximately 200,000 GPS devices."

As for GPS device designers, "LightSquared believes cooperation is the least to expect from an industry that built a business by piggy-backing on the federal government’s GPS network without any investment in infrastructure or spectrum… [T]he commercial GPS industry’s ability to use the US government’s GPS network amounts to an $18 billion federal subsidy."

The last shot doesn't seem likely to create the kumbaya atmosphere Lightsquared says it is striving for, but the company is playing for keeps here; the GPS problem stands in the way of everything it wants to achieve.

But to the GPS industry, the threat of interference also poses an existential threat—and the Coalition to Save Our GPS is talking tough. The group released its own statement (PDF) today spinning the new report and showing total hostility to Lightsquared's plan:

The FCC technical working group report conclusively shows that LightSquared’s proposed operations defy the law of physics, and therefore simply will not work. The report findings are starkly clear: The only real solution to the LightSquared interference problem is to move out of the MSS band altogether. That’s because going forward with LightSquared’s plans, in all of their various shifting iterations, would cause such widespread harmful interference that it would severely cripple GPS, a national utility upon which millions of Americans rely every day and a critically important tool for a wide variety of industries and government operations that is a mainstay of the U.S. economy.

It's up to the FCC to decide whether LightSquared's solution truly is physics-defying or will cure the problem of GPS interference as the company claims.